In the indictment, prosecutors said Callahan raised more than $118 million from at least 40 investors in connection with four different investment funds that he managed between December 2006 and February 2012.

Officials: Two NY Men Charged In $96 Million Ponzi Scheme

Callahan told his investors that their money would be put into mutual funds, hedge funds and other securities, prosecutors said.

But instead of investing the money as promised, authorities said he misappropriated about $96 million and started a large-scale Ponzi scheme.

Prosecutors said Callahan also diverted millions of dollars to an unprofitable 117-unit beachfront resort and development that he co-owned with Manson in Montauk.

Authorities said Manson managed the property and helped Callahan carry out the alleged scheme by lying to an auditor and helping him make fake documents.

“Callahan gave his word that he would invest his clients’ funds safely and responsibly in established vehicles. Instead, he simply stole the funds to prop up his partner’s failing investment,” said United States Attorney Loretta Lynch. “To conceal their status as business failures, the defendants employed all the tricks in the typical con man’s bag. They created fake documents, stole a person’s identity and engaged in forgery.”

In addition, prosecutors said Callahan used money from the various funds to buy expensive cars and homes in Old Westbury and Westhampton while lying to his investors about the status of their accounts.

“Allegedly, Mr. Callahan and Mr. Manson violated the trust of their clients, stealing victims’ hard earned money to perpetuate their fraud,” FBI Assistant Director-in-Charge George Venizelos said. “Mr. Callahan was so indiscriminant, he even stole from a Long Island Fire Department. Today, the game is up.”

The charges against the two include wire fraud, securities fraud and conspiracy to commit wire and securities fraud.

If convicted, they each face a maximum sentence of 20 years in prison on each of the securities fraud, wire fraud and conspiracy to commit wire fraud counts.

Both men pleaded not guilty in U.S. District Court in Central Islip on Thursday. Manson was released on a $1 million bond secured by $500,000 in equity in his father’s home. Callahan was released on a $2 million bond secured by $500,0000 equity in three homes owned by his sister and father, 1010 WINS’ Mona Rivera reported.

In addition, Callahan is required to have a mental health evaluation, Rivera reported.

They were both forced to surrender their passports and cannot travel outside the New York City area as part of their bail agreement, Rivera reported.

Callahan ran investment firms called Horizon Global Advisors. He and his wife were named in a 2012 SEC complaint alleging a $90 million Ponzi scheme.